Slate Office REIT Completes Joint Venture Arrangement and Provides Update on Normal Course Issuer Bid

Slate Office REIT (TSX: SOT.UN) (the "REIT"), is pleased to announce the closing of its previously announced sale of a 25% interest in six properties in the Greater Toronto Area (the “GTA JV Portfolio”) to an investment fund advised by Wafra Inc. (“Wafra”), for a sale price of $131.8 million. The REIT will use the net proceeds from the sale to reduce outstanding debt.

“We are very pleased to announce the completion of this transaction with a sophisticated, global alternative asset investor such as Wafra,” said Scott Antoniak, Chief Executive Officer of the REIT. “The transaction validates 28% of the REIT’s net asset value and demonstrates our ability to execute on our previously announced capital recycling program while delivering a 19% internal rate of return.”

“This transaction is a win for all stakeholders, including our investors, and represents the kind of mutually beneficial partnership that Wafra is known for,” said Yvonne Compitello, Senior Managing Director and head of real estate for Wafra. “Toronto is a key economic and population hub, and we’re excited to have a stake in these well-positioned office properties.”

Highlights

• The sale price for the 25% interest in the GTA JV Portfolio implies a 100% value of $527.2 million or $269 per square foot. This pricing represents an attractive levered internal rate of return of 19%.
• The REIT received incremental debt on five of the six properties, resulting in $31.5 million of additional proceeds to the REIT at its share and extends the weighted average maturity by 1.5 years on this debt. These refinancings have increased the amount of fixed rate debt by $100.9 million.
• Following the sale and the refinancings, the REIT now has approximately $50 million of available liquidity.
• The REIT has completed the sale of whole or partial interests in 12 properties for aggregrate gross proceeds of $237.2 million since announcing its capital recycling program in the first quarter of 2018. These sales have generated in aggregate $34.3 million of profit or $0.45 per unit.

Current Unit Price Continues to Represent a Compelling Investment Opportunity

The current price for the REIT’s units continues to reflect a substantial discount to the REIT’s IFRS net asset value per unit of $8.55 at December 31, 2018. As previously communicated, management continues to believe that there is a substantive basis to support a net asset value of $8.55 per unit, including:

• Wafra's investment provides a market value for $527.2 million of the REIT’s assets: The price received from a large sophisticated global investor for six properties in the Greater Toronto Area provides validation for the net asset value of 28% of the REIT’s portfolio. Further, the REIT received appraisals for each property that were consistent with the REIT’s transaction price.
• Recent acquisitions in the United States: The REIT’s acquisition of its two U.S. assets in Chicago, Illinois each occurred in 2018, and accordingly, represent recent market trading prices. Management continues to observe multiple comparable sales in the Chicago market at pricing parameters in excess of the REIT’s acquisition metrics.

The following is an illustration of the construction of the REIT’s net asset value at December 31, 2018:

This gap between the prevailing trading price and net asset value has created a compelling investment opportunity to purchase units of the REIT. Specifically, the prevailing market price implies a 8.4% capitalization rate on next twelve months expected net operating income and in-place occupancy of 87.1% at December 31, 2018, which is significantly inconsistent with current valuation metrics for similar properties.

Update on Activity Under the Normal Course Issuer Bid

The REIT had previously announced its intention to repurchase units of the REIT through its Normal Course Issuer Bid in order to reduce the number of outstanding REIT units, which is accretive to net asset value and per unit metrics for unitholders. To date, the REIT has repurchased for cancellation 950,602 units, or 1.3% of the diluted number of units outstanding, for a total cost of $5.8 million at an average price of $6.11 per unit.

About Slate Office REIT (TSX: SOT.UN)

Slate Office REIT is an open-ended real estate investment trust. The REIT's portfolio comprises 41 strategic and well-located real estate assets located primarily across Canada's major population centres including two downtown assets in Chicago, Illinois. The REIT is focused on maximizing value through internal organic rental and occupancy growth and strategic acquisitions. Visit slateofficereit.com to learn more.

About Slate Asset Management L.P.

Slate Asset Management L.P. is a leading real estate investment platform with over $6 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly-traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm's careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a proven ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

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